The two decisions that shape everything else are which authorisation category you apply under, and whether you will hold client money at all. Get those two right and the rest is a sequence. Get them wrong and you have built a firm around obligations you did not need, or missed ones you did.
Guide · Updated August 2026
Rule 1.1 of the SRA Authorisation of Firms Rules gives three routes, and which one you can use is determined by who owns and manages the firm:
If the firm will be a company, Rule 1.3 requires it to be incorporated and registered under Parts 1 and 2 of the Companies Act 2006, with at least one practising address in the UK. Whatever the structure, Rule 9.4 requires a manager or employee who is a lawyer with at least three years' practice to supervise the work, and Rule 9.1 requires the SRA to approve every manager and owner.
Decide this before anything else, because the licensed body route is a materially different application and it changes your timetable.
This single choice determines whether you need a client account, five-weekly reconciliations, an annual accountant's report and a £1,950 compensation fund contribution. It is worth genuinely considering the alternatives rather than assuming.
Neither route suits every practice area. A conveyancing or probate practice will hold client money. An advisory or litigation practice billing in arrears often does not need to.
The obligations are specific and they start on day one.
Then the annual report. Rule 12.1 requires you to obtain an accountant's report within six months of your accounting period end if you have held or received client money at any time in the period, or operated a joint account or a client's own account as signatory — and to deliver it to the SRA within the same six months only if it is qualified. Under Rule 12.2 you are exempt if all the client money came from the Legal Aid Agency, or if the statement or passbook balance did not exceed an average of £10,000 and a maximum of £250,000 — both limbs, not either. Rule 12.5 requires the report to be prepared and signed by an accountant who is a member of ICAEW, ICAS, ACCA or ICAI and who is, or works for, a registered auditor.
On 2 June 2026 the SRA announced that it has submitted rule changes to the Legal Services Board that would require every firm holding client money to submit its annual report — not only qualified ones — alongside a mandatory annual declaration, with reporting accountants submitting directly to the SRA. The SRA says the new rules are expected to come into force early in 2027, subject to LSB approval. They are not in force, and nothing in them changes what you must do for your current accounting period.
Rule 8 of the Authorisation of Firms Rules requires an authorised body to have, at all times, an individual designated as its COLP and an individual designated as its COFA, both approved by the SRA. Each must be a manager or employee of the body, must consent, and must not be disqualified under section 99 of the Legal Services Act. Only the COLP must be authorised to carry on reserved legal activities. There is no requirement that the COFA is a lawyer, or an accountant — a common misunderstanding that stops good candidates being considered.
What the roles carry is set out in the SRA Code of Conduct for Firms, in force from 11 April 2025. Paragraph 9.2 requires the COFA to take all reasonable steps to ensure the firm and its people comply with the Accounts Rules, and that a prompt report is made to the SRA of anything the COFA reasonably believes is capable of amounting to a serious breach of those rules. Paragraph 9.1 does the same for the COLP across everything else. The test is promptly — there is no fixed number of days, and any source that gives you one is wrong.
Professional indemnity. The Minimum Terms and Conditions require a sum insured for any one claim, exclusive of defence costs, of at least £3 million for a relevant recognised or licensed body and at least £2 million in all other cases — so an LLP or a company needs £3m, and a sole practitioner or a traditional partnership needs £2m. Defence costs carry no monetary limit, and clause 5.4 requires six years' run-off when the firm ceases. Budget for run-off from the start; it is the cost of closing a firm you have not opened yet.
The Transparency Rules, in force from 11 April 2025, apply if you publish as part of your usual business the availability of any listed service — residential conveyancing, collection and distribution of a deceased person's assets within the UK where the matter is not contested, immigration applications excluding asylum, First-tier Tribunal appeals against Home Office visa or immigration decisions excluding asylum appeals, summary-only road traffic offences dealt with at a single hearing, employment tribunal unfair or wrongful dismissal work, debt recovery up to £100,000 and business premises licensing. Separately, and whatever work you do, Rule 4.1 requires your SRA number and the SRA's digital badge in a prominent place on your website, and Rule 4.2 requires the number and the words authorised and regulated by the Solicitors Regulation Authority on your letterhead and emails. Our transparency rules guide has the full checklist and the penalties.
VAT. Registration is required once taxable turnover in any rolling twelve months exceeds £90,000: register within 30 days of the end of the month in which you crossed it, with effect from the first day of the second month after the breach. There is also a forward look — if you expect to exceed £90,000 in the next 30 days alone, register by the end of that 30-day period, with effect from the date you formed the expectation.
These are the confirmed 2025/26 figures, and they are the right planning basis for a firm opening now.
| Item | 2025/26 | Notes |
|---|---|---|
| Individual practising certificate | £396 | Regulatory fee £326 plus a £70 compensation fund contribution; includes a £48 administration fee |
| Firm compensation fund contribution | £1,950 | Payable by every authorised body that held or received client money in the year, or intends to |
| Firm periodic fee, £200,000 turnover | £1,116 | The SRA's own worked example; the fee is calculated across ten turnover bands |
| Firm periodic fee, £800,000 turnover | £3,846 | The SRA's own worked example |
Worked example — illustrative. A new recognised sole practice expecting £200,000 of turnover and intending to hold client money pays, on 2025/26 figures, £396 for the practising certificate, £1,950 for the firm compensation fund contribution and £1,116 as the firm periodic fee — £3,462 before a penny of professional indemnity premium or the cost of the accountant's report. Note what dominates that figure: the £1,950 is triggered purely by holding or receiving client money. A firm that takes the rule 2.2 route removes it.
For 2026/27 the SRA has proposed moving the compensation fund split to 70% individuals and 30% firms, giving contributions of £170 per individual and £2,170 per firm. Those are proposals pending Legal Services Board approval as at 16 July 2026, not confirmed figures. Practising certificate and firm periodic fee renewal runs from 1 to 31 October.
Two things founders underestimate. The first is lockup: a new firm bills late, collects late and funds its own working capital, so read lockup, WIP and where the cash goes before you set your drawings. The second is that the structure you open in is expensive to change later — the LLP vs limited company guide covers that decision, and our sole practitioner page explains how we set up the bookkeeping so the first accountant's report is straightforward. This page is information about how the rules work, not legal advice, and choosing an authorisation category is a decision to take with the SRA's own guidance and, where the ownership is not straightforward, a solicitor. The SRA regulates England and Wales only.
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In order: settle who will own and manage the firm, because that decides your authorisation category under rule 1.1 of the SRA Authorisation of Firms Rules — recognised sole practice, recognised body, or licensed body if any manager or owner is not legally qualified. Then decide whether you will hold client money, which determines whether you need a client account, five-weekly reconciliations and an annual accountant's report. Then designate a COLP and a COFA for SRA approval, arrange professional indemnity insurance at the right minimum, build the website to the Transparency Rules, and set your accounting records up to satisfy rule 8.1 from the very first transaction.
No, and it is worth deciding deliberately rather than by default. Rule 2.2 of the SRA Accounts Rules allows a firm whose only client money is money for its fees and unpaid disbursements, received before a bill is delivered, to avoid holding it in a client account — provided any disbursement money relates to costs the firm is itself liable for, the firm does not otherwise maintain a client account, and the client is told in advance where and how the money will be held. A third party managed account under rule 11 is the other route. Both remove the client account, the five-weekly reconciliations and the accountant's report.
Only if you hold or receive client money, or operate a joint account or a client's own account as signatory, at any point in the accounting period. If you do, rule 12.1 requires you to obtain a report within six months of the period end, and to deliver it to the SRA within the same six months only if it is qualified. Rule 12.2 exempts you if all client money came from the Legal Aid Agency, or if the statement or passbook balance did not exceed both an average of £10,000 and a maximum of £250,000. Rule 12.5 requires the signatory to be a member of ICAEW, ICAS, ACCA or ICAI who is, or works for, a registered auditor.
Any manager or employee of the authorised body who consents and is not disqualified under section 99 of the Legal Services Act, subject to SRA approval. Rule 8 of the Authorisation of Firms Rules requires only the COLP to be authorised to carry on reserved legal activities — there is no requirement that the COFA be a solicitor, and none that they be an accountant either. What the role carries is set out in paragraph 9.2 of the SRA Code of Conduct for Firms: taking all reasonable steps to ensure compliance with the Accounts Rules, and to ensure a prompt report is made to the SRA of anything capable of amounting to a serious breach of them.
On the confirmed 2025/26 figures, an individual practising certificate is £396, including a £70 compensation fund contribution, and a firm that held or received client money pays a firm compensation fund contribution of £1,950. The firm periodic fee is calculated across ten turnover bands: the SRA's own worked examples give £1,116 on £200,000 of turnover and £3,846 on £800,000. So an illustrative sole practice on £200,000 turnover holding client money pays around £3,462 before insurance. For 2026/27 the SRA has proposed £170 per individual and £2,170 per firm, but those remain proposals pending Legal Services Board approval. Renewal runs from 1 to 31 October.
The Minimum Terms and Conditions in the SRA Indemnity Insurance Rules set the floor. Clause 2.1 requires a sum insured for any one claim, exclusive of defence costs, of at least £3 million where the firm is a relevant recognised body or relevant licensed body, and at least £2 million in all other cases. In practice an LLP or a limited company needs £3 million, while a sole practitioner or a traditional partnership of individuals needs £2 million. Clause 2.2 places no monetary limit on defence costs. Clause 5.4 requires six years of run-off cover when the firm ceases, which is a real cost worth pricing before you open rather than after.
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